Using

Information Technology

to better manage your

Real Estate

by James Melson, Jr.


Imagine that you are a portfolio manager of a large institutional investor and you want to know the implications of changing your yield expectations for a group of properties. Or imagine that you are a corporate real estate executive and you need to compare operating expense increases across the whole spectrum of the companyís owned and leased facilities.

It should be easy to find the information you need quickly, but chances are, if your organization is like many in the real estate industry, that information is neither centralized, easily accessible, easily manipulated, transportable across functional lines, nor simple to transform into report format.

Real estate, in fact, has lagged behind other industries in its use of information technology -- particularly for strategic purposes. A recent Ernst & Young / Grubb & Ellis survey, for example, concluded that, to date, corporate real estate has been slow to invest significant resources in technologies that would relate directly to the use of the "information highway." Cost, in fact, was the major concern of those surveyed.

But the industryís use of information technology -- or its resistance to it -- must change, as the transformation of real estate from private to public ownership continues, and as corporate America looks more closely at real estate as a tool for operating efficiency and cost reduction.

The real estate industry has typically opted for one of two solutions: using off-the-shelf or customized software. These solutions have presented a number of problems. Off-the-shelf software might be too rigid to suit an individual companyís needs, while custom solutions cam be prohibitively expensive.

In addition, both solutions focus on individual transactions, and limit the userís ability to analyze broader portfolio issues. More often than not a company might operate with several different real estate-related data bases, none of which communicate with one another.

Whatís needed is a middle ground approach that enables users to choose from a menu of applications and to eliminate modules they donít need. This approach can link various functions, such as lease data, general ledger, asset and property management, to allow users to ask all the what if questions they need in making real estate decisions.

Companies should be using technology to increase productivity and track and manage real estate cost-efficiently, and also to provide a seamless integration of data easily accessible by professionals company-wide.

For its clients, Melson Technologies develops Automation Plans. The Automation Plan is a road map to optimize the use of real estate technology. It defines requirements, specifications, and work programs, and must support managementís long-range vision. Typical objectives are:

A combination of solutions is usually required in developing an Automation Plan because the issues identified are often complex and interrelated. The solutions often address all aspects of real estate operations, including realignment of the organizational structure, modification of policies and business processes, and enhancement of information/production systems.

The plan resolves the problem of "islands of information." Communication/network requirements and service levels are determined in a way that balances expected results with affordability.

Revamping your information systems doesnít necessarily mean "out with the old, in with the new." A more affordable approach is to design a solution by building on a companyís existing system. Typically, the capabilities of software applications are not fully used. Achieving optimal performance from software products currently in use is the most affordable component of an overall system solution.

One of the benefits for clients embarking on an Automation Plan is the establishment of cross-functional teams comprised of professionals within a company who may not have understood one anotherís businesses, processes, or goals before. As part of the Automation Plan, a steering committee, comprised of corporate management, system technicians, and users, is established to assess current systems, clarify goals, and review business processes.

Traditionally, real estate decisions have been more emotionally driven, but because of securitization, real estate has become an accepted investment class. Corporations and institutions have realized that the lower the costs of operating that investment, the higher the value and return.

Historically, the applications available in the market have been aimed primarily at compiling and tracking statistics in a property management sense. They have not been integrated nor have they been used as strategic products which support tasks such as designing plans for reducing operating costs, or for repositioning or restructuring investments, especially in an asset allocation scenario.

The next level of software programs need to empower the institutional and corporate owner with both the insight and tools to experiment with different operational scenarios for their assets.

Rapid advancement of technology will continue. Therefore, companies should select applications and tools that remain in the mainstream of generally accepted technology. Conformity with industry consensus will minimize the risk of technology obsolescence.


James E. Melson, Jr. is founder of Melson Technologies, Inc., a developer of proprietary real estate management and portfolio accounting software including the commonly used Skyline and PRO-JECT programs.


This material has been provided by Melson Technogies, Inc. and is presented here by The Arctos Group because it considers Melson Technologies to be representative of important trends in the real estate industry. The Arctos Group has no affiliation with Melson Technologies and the presentation of this material does not represent any specific endorsements by or between Melson Technologies and The Arctos Group.

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